Financial & Managerial Accounting for Decision Makers, 4e

by Hanlon, Magee, Pfeiffer, Dyckman

ISBN: 978-1-61853-361-6 | Copyright 2021

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Welcome to the fourth edition of Financial & Managerial Accounting for Decision Makers!

To our adopters of the previous editions, thank you for the great success those editions have enjoyed. We wrote this book to equip students with the accounting techniques and insights necessary to succeed in todays business environment. It reflects our combined experience in teaching accounting to college students at all levels. For anyone who pursues a career in business, the ability to read, analyze, and interpret accounting information is an essential skill. Financial & Managerial Accounting for Decision Makers is written for future business leaders who want to understand how accounting information is prepared and how the information is used by investors, creditors, financial analysts, and managers. Our goal is to provide the most engaging, relevant, and accessible textbook available.

Target Audience

Financial & Managerial Accounting for Decision Makers is intended for use in an introductory accounting course that combines financial and managerial accounting concepts, at either the undergraduate or graduate level; one that balances the preparation of accounting information with its analysis and interpretation. This book accommodates mini-courses lasting only a few days as well as extended courses lasting a full semester.
This book is real-world oriented and focuses on the most salient aspects of accounting. It teaches students how to read, analyze, and interpret financial accounting data to make informed business decisions. To that end, it consistently incorporates real company data, both in the body of each chapter and throughout the assignment material.

Real Data Incorporated Throughout

Today's business students must be skilled in using real financial statements to make business decisions. We feel strongly that the morexposure students get to real financial statements, the more comfortable they become with the variety in financial statements that exists across companies and industries. Through their exposure to various financial statements, students will learn that, while financial statements do not all look the same, they can readily understand and interpret them to make business decisions. Furthermore, todays students must have the skills to go beyond basic financial statements to interpret and apply nonfinancial disclosures, such as foot- notes and supplementary reports. We expose students to the analysis and interpretation of real company data and nonfinancial disclosures through the use of focus companies in each chapter, the generous incorporation of footnotes, financial analysis discussions in nearly every chapter, and an abundance of assignments that draw on real company data and disclosures.

Focus Companies for Each Chapter

Each chapters content is explained through the accounting and reporting activities of real companies. Each chapter incorporates a “focus company for special emphasis and demonstration. The enhanced instructional value of focus companies comes from the way they engage students in real analysis and interpretation. Focus companies were selected based on student appeal and the diversity of industries.

Footnotes and Managerial Disclosures

We incorporate footnote and other management disclosures, where appropriate, throughout the book. We explain the significance of the footnote and then demonstrate how to use the disclosed information to make managerial inferences and decisions. A representative sample follows.

Financial Analysis Discussions

Each financial accounting chapter includes a financial analysis discussion that introduces key ratios and applies them to the financial statements of the chapters focus company. By weaving some analysis into each of these chapters, we try to instill in students a deeper appreciation for the significance of the accounting methods being discussed. One such analysis discussion follows.

Assignments That Draw on Real Data

It is essential for students to be able to apply what they have learned to real financial managerial decisions. Therefore, we have included an abundance of assignments in each chapter that draw on real data. A representative example follows.

Balanced Approach

As instructors of introductory financial accounting, we recognize that the first financial accounting course serves the general business students as well as potential accounting majors. Financial & Managerial Accounting for Decision Makers embraces this reality. This book balances reporting, analysis, interpretation, and decision making with the more standard aspects of accounting such as journal entries, T-accounts, and the preparation of financial statements.

3-Step Process:  Analyze, Journalize, Post

One technique we use throughout the financial accounting portion of the book to maintain a balanced approach is the incorporation of a 3-step process to analyze and record transactions. Step 1 analyzes the impact of various transactions on the financial statements using the financial statement effects template. Step 2 records the transaction using journal entries, and Step 3 requires students to post the journal entries to T-accounts.

The template captures each transactions effects on the four financial statements: the balance sheet, income statement, statement of stockholders’ equity, and statement of cash flows. For the balance sheet, we differentiate between cash and noncash assets to identify the cash effects of transactions. Likewise, equity is separated into the contributed and earned capital components (the latter includes retained earnings as its major element). Finally, income statement effects are separated into revenues, expenses, and net income (the updating of retained earnings is denoted with an ar- row line running from net income to earned capital). This template provides a convenient means to represent financial accounting transactions and events in a simple, concise manner for assessing their effects on financial statements.

Innovative Pedagogy

Business Insights

Students appreciate and become more engaged when they can see the real-world relevance of what they are learning in the classroom. We have included a generous number of current, real-world examples throughout each chapter in Business Insight boxes. The following is a representative example:

Decision-Making Orientation

One primary goal of an accounting course is to teach students the skills needed to apply their accounting knowledge to solving real business problems. With that goal in mind, You Make the Call boxes in each chapter encourage students to apply the material presented to solving actual business scenarios.

Mid-Chapter and Chapter-End Reviews

Accounting can be challenging—especially for students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each chapter and to ensure student comprehension, we include mid-chapter and chapter-end reviews that require students to recall and apply the accounting techniques and concepts described in each chapter.

Research Insights for Business Students

Academic research plays an important role in the way business is conducted, accounting is performed, and students are taught. It is important for students to recognize how modern research and modern business practice interact. Therefore, we periodically incorporate relevant research to help students understand the important relation between research and modern business.

New in The 4th Edition

Financial Accounting Chapters (1-12)

  • The authors have added a brief introduction to Data Analytics in Chapter 1 and Appendix B at the end of the book, which provides a more in-depth exploration of Data Analytics.
  • Updated Standards: As appropriate, the text and assignments have been updated to reflect the latest FASB standards:
    •  The new Revenue Recognition standard is reflected in Chapter 6 and throughout the book where appropriate
    • Inventory coverage in Chapter 7 was revised to reflect the new standard on lower-of-cost-or-net realizable value
    • Chapter 10 reflects the new Lease standard
    • Chapter 12 reflects the new Investments standard
  • Tax Cut and Jobs Act: In addition to the new FASB standards, the new edition reflects the Tax Cut and Job Act of 2017. The tax section in Chapter 10 reflects the new tax law.
  • CVS Health Corporation replaced Golden Enterprises as the focus company of Chapter 4.
  • Microsoft replaced Cisco as the focus company of Chapter 6.
  • The parent company of Google, Alphabet, is now the focus company of Chapter 12.
  • In addition to the chapter-specific changes, there have been several changes that span the entire book. Some of these global changes include:
    • Updated numbers for examples, illustrations, and assignments that use real data
    • Updated footnotes and other nonfinancial disclosures
    • Updated excerpts from the business and popular press
    • Numerous assignments in each chapter have been revised or replaced with new assignments

Managerial Accounting Chapters (13-24)

  • Contemporary Topics and Examples: The authors have revised and added new Business Insight boxes throughout each chapter to bring the accounting to life for students using current, real-world examples. Several new Research Insight boxes have been incorporated throughout the text to emphasize the important relation- ship between research and modern business.
  • Real Company Examples: Dozens of new, real company examples have been integrated throughout the text.
  • myBusinessCourse (MBC) is a complete learning and assessment program that accompanies the textbook and contributes to student success in this course. MBC has been expanded to include more assignments and resources. In addition, the Guided Examples and eLectures have been revised and improved.

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Guided Example Videos

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Auto-graded assignments

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Example of the Road Map & video features available for each chapter.

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Road Map
LO Learning Objective Page eLecture Guided Example Assignments

Describe and construct the balance sheet and understand how it can be used for analysis.


14, 15, 16, 17, 19, 21, 24, 25, 26, 27, 29, 30, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 46, 49, 50, 51, 52, 53, 54, 55, 56, 59, 60, 66


Use the financial statement effects template (FSET) to analyze transactions.


18, 29, 30, 31, 44, 45, 47, 57, 62, 67, 69


Describe and construct the income statement and discuss how it can be used to evaluate management performance.


19, 20, 21, 22, 23, 28, 31, 35, 37, 39, 40, 41, 42, 43, 44, 47, 49, 50, 51, 54, 57, 61, 62, 64, 65, 66, 67, 69, 71, 72


Explain revenue recognition, accrual accounting, and their effects on retained earnings.


18, 19, 20, 22, 23, 25, 26, 28, 29, 31, 39, 44, 47, 57, 62, 67, 69, 71


Illustrate equity transactions and the statement of stockholders' equity.


18, 21, 22, 23, 24, 27, 31, 35, 36, 37, 53, 66, 67, 69, 71


Use journal entries and T-accounts to analyze and record transactions.


32, 33, 45, 48, 58, 63, 68, 70


Compute net working capital, the current ratio, and the quick ratio, and explain how they reflect liquidity.


34, 36, 38, 41, 42, 46, 52, 55, 56, 59, 60

Expand/Collapse All
Preface (pg. iv)
Brief Contents (pg. xiii)
Contents (pg. xiv)
Chapter 1 Introducing Financial Accounting (pg. 2)
Demand for Accounting Information (pg. 4)
Who Uses Financial Accounting Information? (pg. 5)
Costs and Benefits of Disclosure (pg. 7)
Business Activities (pg. 7)
Planning Activities (pg. 8)
Investing Activities (pg. 8)
Financing Activities (pg. 9)
Operating Activities (pg. 10)
Financial Statements (pg. 11)
Balance Sheet (pg. 12)
Income Statement (pg. 12)
Statement of Cash Flows (pg. 14)
Financial Statement Linkages (pg. 15)
Information Beyond Financial Statements (pg. 16)
Mid-Chapter Review (pg. 16)
Financial Reporting Environment (pg. 17)
Generally Accepted Accounting Principles (pg. 17)
Regulation and Oversight (pg. 18)
Role of the Auditor (pg. 19)
A Global Perspective (pg. 20)
Analyzing Financial Statements (pg. 21)
Profitability Analysis (pg. 21)
Analysis Objective (pg. 21)
Credit Risk Analysis (pg. 23)
Analysis Objective (pg. 23)
Technology and Accounting (pg. 24)
Organization of the Book (pg. 25)
Chapter-End Review (pg. 25)
Appendix 1A: Conceptual Framework for Financial Reporting (pg. 26)
Objective of Financial Reporting (pg. 26)
Qualitative Characteristics of Useful Financial Information (pg. 26)
Enhancing Qualitative Characteristics (pg. 27)
The Cost Constraint (pg. 28)
Additional Underlying Basic Assumptions (pg. 28)
Summary (pg. 28)
Guidance Answers . . . You Make the Call (pg. 30)
Key Ratios (pg. 30)
Key Terms (pg. 30)
Multiple Choice (pg. 31)
Questions (pg. 31)
Mini Exercises (pg. 32)
Exercises (pg. 33)
Problems (pg. 35)
Solutions to Review Problems (pg. 39)
Mid-Chapter Review (pg. 39)
Chapter-End Review (pg. 40)
Chapter 2 Constructing Financial Statements (pg. 42)
Reporting Financial Condition (pg. 44)
Assets (pg. 44)
Liabilities and Equity (pg. 47)
Reporting Financial Performance (pg. 53)
Accrual Accounting for Revenues and Expenses (pg. 54)
Retained Earnings (pg. 56)
Analyzing and Recording Transactions for the Income Statement (pg. 56)
Reporting on Equity (pg. 60)
Analyzing and Recording Equity Transactions (pg. 60)
Statement of Stockholders’ Equity (pg. 61)
Mid-Chapter Review 3 (pg. 61)
Journalizing and Posting Transactions (pg. 62)
T-Account (pg. 62)
Debit and Credit System (pg. 62)
T-Account with Debits and Credits (pg. 63)
The Journal Entry (pg. 64)
Analyze, Journalize, and Post (pg. 64)
Analyzing Financial Statements (pg. 71)
Analysis Objective (pg. 71)
Chapter-End Review (pg. 73)
Summary (pg. 73)
Guidance Answers . . . You Make the Call (pg. 74)
Key Ratios (pg. 74)
Key Terms (pg. 75)
Multiple Choice (pg. 75)
Questions (pg. 76)
Mini Exercises (pg. 76)
Exercises (pg. 80)
Problems (pg. 86)
Cases and Projects (pg. 92)
Solutions to Review Problems (pg. 93)
Chapter 3 Adjusting Accounts for Financial Statements (pg. 100)
Accounting Cycle (pg. 102)
Analyzing and Recording Transactions (pg. 103)
Review of Accounting Procedures (pg. 103)
Review of Recording Transactions (pg. 103)
Adjusting the Accounts (pg. 109)
Preparing an Unadjusted Trial Balance (pg. 110)
Types of Adjustments (pg. 110)
Ethics and Adjusting Entries (pg. 117)
Mid-Chapter Review (pg. 117)
Constructing Financial Statements from Adjusted Accounts (pg. 118)
Preparing an Adjusted Trial Balance (pg. 118)
Preparing Financial Statements (pg. 118)
Closing Temporary Accounts (pg. 122)
Closing Process (pg. 123)
Closing Steps Illustrated (pg. 123)
Preparing a Post-Closing Trial Balance (pg. 124)
Subsequent Events (pg. 125)
Summarizing the Accounting Cycle (pg. 125)
Financial Statement Analysis (pg. 125)
Using Information on Levels and Flows (pg. 125)
Chapter-End Review (pg. 127)
Summary (pg. 128)
Guidance Answers . . . You Make the Call (pg. 128)
Key Terms (pg. 129)
Multiple Choice (pg. 129)
Questions (pg. 130)
Mini Exercises (pg. 130)
Exercises (pg. 133)
Problems (pg. 136)
Cases and Projects (pg. 145)
Solutions to Review Problems (pg. 147)
Chapter 4 Reporting and Analyzing Cash Flows (pg. 156)
Purpose of the Statement of Cash Flows (pg. 158)
What Do We Mean by “CASH”? (pg. 158)
What Does a Statement of Cash Flows Look Like? (pg. 159)
Framework for the Statement of Cash Flows (pg. 159)
Operating Activities (pg. 160)
Investing Activities (pg. 160)
Financing Activities (pg. 160)
Usefulness of Classifications (pg. 161)
Mid-Chapter Review 1 (pg. 162)
Preparing the Statement of Cash Flows-Operating Activities (pg. 162)
Converting Revenues and Expenses to Cash Flows from Operating Activities (pg. 164)
Mid-Chapter Review 2 (pg. 171)
Reconciling Net Income and Cash Flow from Operating Activities (pg. 171)
Cash Flow from Operating Activities Using the Indirect Method (pg. 173)
Mid-Chapter Review 3 (pg. 174)
Preparing the Statement of Cash Flows-Investing and Financing Activities (pg. 174)
Cash Flows from Investing Activities (pg. 174)
Cash Flows from Financing Activities (pg. 175)
Mid-Chapter Review 4 (pg. 177)
Additional Detail in the Statement of Cash Flows (pg. 177)
Case Illustration (pg. 177)
Gains and Losses on Investing and Financing Activities (pg. 179)
Noncash Investing and Financing Activities (pg. 180)
Mid-Chapter Review 5 (pg. 181)
The Effects of Foreign Currencies on the Cash Flow Statement (pg. 181)
Supplemental Disclosures (pg. 182)
Analysis Objective (pg. 183)
Chapter-End Review (pg. 186)
Appendix 4A: A Spreadsheet Approach to Preparing the Statement of Cash Flows (pg. 186)
Step 1: Classify the balance sheet accounts. (pg. 186)
Step 2: Compute the changes in the balance sheet accounts. (pg. 187)
Step 3: Handle the accounts that have single classifications. (pg. 187)
Step 4: Enter the effect of investing/financing transactions that do not involve cash. (pg. 188)
Step 5: Analyze the change in retained earnings. (pg. 188)
Step 6: Analyze the change in plant assets. (pg. 188)
Step 7: Total the columns. (pg. 188)
Step 8: Prepare the cash flow statement. (pg. 188)
Appendix 4A Review (pg. 189)
Summary (pg. 189)
Guidance Answers . . . You Make the Call (pg. 190)
Key Ratios (pg. 191)
Key Terms (pg. 191)
Multiple Choice (pg. 191)
Questions (pg. 192)
Mini Exercises (pg. 193)
Exercises (pg. 197)
Problems (pg. 201)
Cases and Projects (pg. 209)
Solutions to Review Problems (pg. 214)
Chapter 5 Analyzing and Interpreting Financial Statements (pg. 218)
Introduction (pg. 220)
Assessing the Business Environment (pg. 220)
Vertical and Horizontal Analysis (pg. 221)
Mid-Chapter Review 1 (pg. 223)
Return on Investment (pg. 225)
Return on Equity (ROE) (pg. 225)
Return on Assets (ROA) (pg. 225)
Return on Financial Leverage (ROFL) (pg. 226)
Mid-Chapter Review 2 (pg. 227)
Disaggregating ROA (pg. 228)
Liquidity and Solvency (pg. 233)
Liquidity Analysis (pg. 235)
Solvency Analysis (pg. 237)
Limitations of Ratio Analysis (pg. 239)
Chapter-End Review (pg. 240)
Appendix 5A: Analyzing and Interpreting Core Operating Activities (pg. 241)
Reporting Operating Activities in the Income Statement (pg. 241)
Reporting Operating Activities in the Balance Sheet (pg. 242)
Disaggregating RNOA (pg. 242)
Appendix 5A Review (pg. 243)
Appendix 5B: Financial Statement Forecasts (pg. 243)
Step 1. Forecast Sales Revenue (pg. 243)
Step 2. Forecast Operating Expenses (pg. 244)
Step 3. Forecast Operating Assets and Liabilities (pg. 244)
Step 4. Forecast Nonoperating Assets, Liabilities, Revenues and Expenses (pg. 244)
Step 5. Forecast Net Income, Dividends, and Retained Earnings (pg. 245)
Step 6. Forecast Cash (pg. 246)
Step 7. Prepare the Cash Flow Statement Forecast (pg. 247)
Additional Considerations (pg. 247)
Appendix 5B Review (pg. 248)
Summary (pg. 248)
Key Ratios (pg. 249)
Key Terms (pg. 250)
Multiple Choice (pg. 250)
Guidance Answers . . . You Make the Call (pg. 251)
Questions (pg. 251)
Mini Exercises (pg. 251)
Exercises (pg. 255)
Problems (pg. 259)
Cases and Projects (pg. 265)
Solutions to Review Problems (pg. 266)
Chapter 6 Reporting and Analyzing Revenues, Receivables, and Operating Income (pg. 270)
Reporting Operating Income (pg. 272)
Revenue Recognition (pg. 274)
Revenue Recognition Subsequent to Customer Purchase (pg. 276)
Mid-Chapter Review 1 (pg. 279)
Mid-Chapter Review 2 (pg. 283)
Reporting Accounts Receivable (pg. 283)
Determining the Allowance for Uncollectible Accounts (pg. 284)
Reporting the Allowance for Uncollectible Accounts (pg. 285)
Recording Write-offs of Uncollectible Accounts (pg. 286)
Footnote Disclosures and Interpretations (pg. 288)
Mid-Chapter Review 3 (pg. 291)
Analyzing Financial Statements (pg. 291)
Net Operating Profit After Taxes (NOPAT) (pg. 292)
Analysis Objective (pg. 292)
Analysis Objective (pg. 294)
Earnings Management (pg. 296)
Chapter-End Review (pg. 298)
Appendix 6A: Reporting Nonrecurring Items (pg. 298)
Discontinued Operations (pg. 299)
Exit or Disposal Costs (pg. 299)
Appendix 6A Review (pg. 301)
Summary (pg. 301)
Guidance Answers . . . You Make the Call (pg. 302)
Key Ratios (pg. 302)
Key Terms (pg. 303)
Multiple Choice (pg. 303)
Questions (pg. 304)
Mini Exercises (pg. 304)
Exercises (pg. 308)
Problems (pg. 314)
Cases and Projects (pg. 317)
Solutions to Review Problems (pg. 321)
Chapter 7 Reporting and Analyzing Inventory (pg. 326)
Reporting Operating Expenses (pg. 328)
Expense Recognition Principles (pg. 328)
Reporting Inventory Costs in the Financial Statements (pg. 329)
Recording Inventory Costs in the Financial Statements (pg. 330)
Inventory and the Cost of Acquisition (pg. 331)
Inventory Reporting by Manufacturing Firms (pg. 331)
Inventory Costing Methods (pg. 332)
Illustration (pg. 333)
First-In, First-Out (FIFO) (pg. 333)
Last-In, First-Out (LIFO) (pg. 334)
Inventory Costing and Price Changes (pg. 336)
Average Cost (AC) (pg. 336)
Lower of Cost or Net Realizable Value (pg. 337)
Mid-Chapter Review (pg. 339)
Financial Statement Effects and Disclosure (pg. 340)
Financial Statement Effects of Inventory Costing (pg. 341)
Analyzing Financial Statements (pg. 345)
Analysis Objective (pg. 345)
Analysis Objective (pg. 347)
Chapter-End Review (pg. 350)
Appendix 7A: LIFO Liquidation (pg. 351)
Analysis Implications (pg. 352)
Appendix 7A Review (pg. 352)
Summary (pg. 353)
Guidance Answers . . . You Make the Call (pg. 354)
Key Ratios (pg. 354)
Key Terms (pg. 354)
Multiple Choice (pg. 355)
Questions (pg. 356)
Mini Exercises (pg. 356)
Exercises (pg. 359)
Problems (pg. 362)
Cases and Projects (pg. 365)
Solutions to Review Problems (pg. 366)
Chapter 8 Reporting and Analyzing Long-Term Operating Assets (pg. 372)
Introduction (pg. 374)
Property, Plant, and Equipment (PPE) (pg. 374)
Determining Costs to Capitalize (pg. 375)
Depreciation (pg. 376)
Depreciation Methods (pg. 377)
Changes in Accounting Estimates (pg. 380)
Asset Sales and Impairments (pg. 381)
Footnote Disclosure (pg. 383)
Analyzing Financial Statements (pg. 384)
Analysis Objective (pg. 384)
Analysis Objective (pg. 385)
Cash Flow Effects (pg. 387)
Mid-Chapter Review (pg. 387)
Intangible Assets (pg. 388)
Research and Development Costs (pg. 388)
Patents (pg. 389)
Trademarks (pg. 389)
Franchise Rights (pg. 390)
Amortization and Impairment of Identifiable Intangible Assets (pg. 390)
Goodwill (pg. 392)
Footnote Disclosures (pg. 392)
Analysis Implications (pg. 393)
Chapter-End Review (pg. 394)
Summary (pg. 394)
Guidance Answers . . . You Make the Call (pg. 395)
Key Ratios (pg. 395)
Key Terms (pg. 395)
Multiple Choice (pg. 396)
Questions (pg. 396)
Mini Exercises (pg. 397)
Exercises (pg. 399)
Problems (pg. 402)
Cases and Projects (pg. 405)
Solutions to Review Problems (pg. 407)
Chapter 9 Reporting and Analyzing Liabilities (pg. 412)
Introduction (pg. 414)
Current Liabilities (pg. 415)
Accounts Payable (pg. 415)
Mid-Chapter Review 1 (pg. 417)
Accrued Liabilities (pg. 417)
Other Current Liabilities (pg. 421)
Mid-Chapter Review 2 (pg. 422)
Current Nonoperating (Financial) Liabilities (pg. 422)
Mid-Chapter Review 3 (pg. 424)
Long-Term Liabilities (pg. 424)
Installment Loans (pg. 425)
Bonds (pg. 427)
Pricing of Bonds (pg. 427)
Effective Cost of Debt (pg. 429)
Reporting of Bond Financing (pg. 430)
Effects of Discount and Premium Amortization (pg. 432)
The Fair Value Option (pg. 434)
Effects of Bond Repurchase (pg. 435)
Financial Statement Footnotes (pg. 436)
Interest and the Statement of Cash Flows (pg. 437)
Disclosure of Commitments and Contingencies (pg. 438)
Analyzing Financial Statements (pg. 438)
Analysis Objective (pg. 439)
Debt Ratings and the Cost of Debt (pg. 441)
Chapter-End Review (pg. 443)
Summary (pg. 443)
Guidance Answers . . . You Make the Call (pg. 444)
Key Ratios (pg. 444)
Key Terms (pg. 444)
Multiple Choice (pg. 445)
Questions (pg. 445)
Mini Exercises (pg. 446)
Exercises (pg. 449)
Problems (pg. 452)
Cases and Projects (pg. 456)
Solutions to Review Problems (pg. 458)
Chapter 10 Reporting and Analyzing Leases, Pensions, Income Taxes, and Commitments and Contingencies (pg. 462)
Introduction (pg. 464)
Leases (pg. 465)
Lessee Reporting of Leases (pg. 466)
Footnote Disclosures of Leases (pg. 473)
Mid-Chapter Review 1 (pg. 476)
Pensions (pg. 477)
Balance Sheet Effects of Defined Benefit Pension Plans (pg. 477)
Income Statement Effects of Defined Benefit Pension Plans (pg. 479)
Footnote Disclosures-Components of Plan Assets and PBO (pg. 480)
Footnote Disclosures-Components of Pension Expense (pg. 481)
Footnote Disclosures and Future Cash Flows (pg. 483)
Other Post-Employment Benefits (pg. 485)
Mid-Chapter Review 2 (pg. 486)
Accounting For Income Taxes (pg. 486)
Book-Tax Differences (pg. 487)
Revaluation of Deferred Tax Assets and Liabilities due to a Tax Rate Change (pg. 493)
Income Tax Disclosures (pg. 494)
Deferred Taxes in the Cash Flow Statement (pg. 497)
Computation and Analysis of Taxes (pg. 497)
Mid-Chapter Review 3 (pg. 497)
Commitments and Contengencies and Other Disclosures (pg. 498)
Analyzing Financial Statements (pg. 499)
Analysis Objective (pg. 499)
Summary (pg. 501)
Guidance Answers . . . You Make The Call (pg. 502)
Key Ratios (pg. 502)
Key Terms (pg. 502)
Multiple Choice (pg. 502)
Questions (pg. 503)
Mini Exercises (pg. 504)
Exercises (pg. 506)
Problems (pg. 512)
Cases and Projects (pg. 518)
Solutions to Review Problems (pg. 523)
Chapter 11 Reporting and Analyzing Stockholders’ Equity (pg. 528)
Introduction (pg. 530)
Contributed Capital (pg. 531)
Classes of Stock (pg. 531)
Accounting for Stock Transactions (pg. 533)
Mid-Chapter Review 1 (pg. 538)
Earned Capital (pg. 538)
Cash Dividends (pg. 538)
Mid-Chapter Review 2 (pg. 540)
Stock Dividends and Splits (pg. 540)
Stock Transactions and the Cash Flows Statement (pg. 542)
Mid-Chapter Review 3 (pg. 543)
Comprehensive Income (pg. 543)
Summary of Stockholders’ Equity (pg. 544)
Analyzing Financial Statements (pg. 544)
Analysis Objective (pg. 544)
Mid-Chapter Review 4 (pg. 546)
Earnings Per Share (pg. 546)
Computation and Analysis of EPS (pg. 547)
Chapter-End Review (pg. 549)
Appendix 11A: Dilutive Securities: Accounting for convertible securities, stock options, and restr (pg. 549)
Convertible Securities (pg. 549)
Stock Rights (pg. 550)
Employee Stock Options (pg. 551)
Restricted Stock (pg. 552)
Appendix 11A Review (pg. 555)
Summary (pg. 555)
Guidance Answers . . . You Make the Call (pg. 556)
Key Ratios (pg. 556)
Key Terms (pg. 557)
Multiple Choice (pg. 557)
Questions (pg. 558)
Exercises (pg. 563)
Problems (pg. 568)
Cases and Projects (pg. 572)
Solutions to Review Problems (pg. 576)
Chapter 12 Reporting and Analyzing Financial Investments (pg. 580)
Introduction (pg. 582)
Fair Value: An Introduction (pg. 584)
Passive Investments in Debt Securities (pg. 584)
Acquisition of the Investment (pg. 585)
Investments Reported at Cost (pg. 585)
Sale of the Investment (pg. 586)
Debt Investments Marked to Fair Value (pg. 587)
Passive Investments in Equity Securities (pg. 591)
Financial Statement Disclosures (pg. 592)
Potential for Earnings Management (pg. 595)
Mid-Chapter Review 1 (pg. 595)
Investments with Significant Influence (pg. 596)
Accounting for Investments with Significant Influence (pg. 596)
Equity Method Accounting and Effects on Ratios (pg. 598)
Financial Statement Disclosures (pg. 598)
Mid-Chapter Review 2 (pg. 600)
Investments with Control (pg. 600)
Accounting for Investments with Control (pg. 600)
Reporting of Acquired Assets and Liabilities (pg. 602)
Noncontrolling Interest (pg. 606)
Financial Statement Analysis (pg. 608)
Chapter-End Review (pg. 609)
Appendix 12A: Equity Method Mechanics (pg. 609)
Appendix 12B: Consolidation Accounting Mechanics (pg. 611)
Appendix 12C: Accounting for Investments in Derivatives (pg. 612)
Reporting of Derivatives (pg. 612)
Disclosure of Derivatives (pg. 613)
Summary (pg. 613)
Guidance Answers . . . You Make the Call (pg. 615)
Key Terms (pg. 615)
Questions (pg. 616)
Mini Exercises (pg. 616)
Exercises (pg. 619)
Problems (pg. 626)
Cases and Projects (pg. 630)
Solutions to Review Problems (pg. 632)
Chapter 13 Managerial Accounting: Tools for Decision Making (pg. 638)
Uses of Accounting Information (pg. 640)
Financial Accounting (pg. 640)
Managerial Accounting (pg. 641)
Mid-Chapter Review 1 (pg. 643)
Strategic Cost Management (pg. 643)
Mid-Chapter Review 2 (pg. 644)
Missions, Goals, and Strategies (pg. 644)
An Organization’s Mission and Goals (pg. 644)
Strategic Position Analysis (pg. 645)
Managerial Accounting and Goal Attainment (pg. 647)
Planning, Organizing, and Controlling (pg. 648)
Mid-Chapter Review 3 (pg. 649)
Changing Environment of Business (pg. 649)
Global Competition and Its Key Dimensions (pg. 649)
Big Data and Analysis (pg. 650)
Robotics and Cognitive Technologies (pg. 650)
Enterprise Risk Management (ERM) (pg. 651)
Mid-Chapter Review 4 (pg. 651)
Ethics in Managerial Accounting (pg. 651)
Codes of Ethics (pg. 652)
Corporate Governance (pg. 653)
Sustainability Accounting and Corporate Social Responsibility (pg. 654)
Mid-Chapter Review 5 (pg. 654)
Cost Drivers (pg. 655)
Structural Cost Drivers (pg. 655)
Organizational Cost Drivers (pg. 656)
Activity Cost Drivers (pg. 657)
Chapter-End Review (pg. 658)
Guidance Answers . . . You Make the Call (pg. 658)
Key Terms (pg. 658)
Multiple Choice (pg. 659)
Questions (pg. 659)
Mini Exercises (pg. 660)
Exercises (pg. 662)
Cases and Projects (pg. 663)
Solutions to Review Problems (pg. 665)
Chapter 14 Cost Behavior, Activity Analysis, and Cost Estimation (pg. 668)
Cost Behavior Analysis (pg. 670)
Four Basic Cost Behavior Patterns (pg. 670)
Factors Affecting Cost Behavior Patterns (pg. 672)
Mid-Chapter Review 1 (pg. 673)
Total Cost Function for an Organization or Segment (pg. 673)
Relevant Range (pg. 674)
Additional Cost Behavior Patterns (pg. 676)
Committed and Discretionary Fixed Costs (pg. 678)
Mid-Chapter Review 2 (pg. 678)
Cost Estimation (pg. 679)
High-Low Cost Estimation (pg. 679)
Scatter Diagrams (pg. 681)
Least-Squares Regression (pg. 681)
Mid-Chapter Review 3 (pg. 684)
Additional Issues in Cost Estimation (pg. 684)
Changes in Technology and Prices (pg. 684)
Matching Activity and Costs (pg. 685)
Identifying Activity Cost Drivers (pg. 685)
Mid-Chapter Review 4 (pg. 685)
Alternative Cost Driver Classifications (pg. 685)
Manufacturing Cost Hierarchy (pg. 686)
Customer Cost Hierarchy (pg. 687)
Chapter-End Review (pg. 688)
Guidance Answers . . . You Make the Call (pg. 689)
KEY RATIOS (pg. 689)
Key Terms (pg. 690)
Multiple Choice (pg. 690)
Questions (pg. 691)
Mini Exercises (pg. 692)
Exercises (pg. 694)
Problems (pg. 697)
Cases and Projects (pg. 699)
Solutions to Review Problems (pg. 702)
Chapter 15 Cost-Volume-Profit Analysis and Planning (pg. 704)
Cost-Volume-Profit Analysis (pg. 706)
Key Assumptions (pg. 707)
Profit Formula (pg. 708)
Mid-Chapter Review 1 (pg. 710)
Contribution and Functional Income Statements (pg. 710)
Contribution Income Statement (pg. 710)
Functional Income Statement (pg. 711)
Analysis Using Contribution Margin Ratio (pg. 711)
Mid-Chapter Review 2 (pg. 712)
Break-Even Point and Profit Planning (pg. 712)
Determining Break-Even Point in Units (pg. 712)
Profit Planning (pg. 714)
Cost-Volume-Profit Graph (pg. 715)
Profit-Volume Graph (pg. 716)
Impact of Income Taxes (pg. 716)
Mid-Chapter Review 3 (pg. 718)
Multiple-Product Cost-Volume-Profit Analysis (pg. 718)
Determining Break-Even and Target Profit Sales Dollars (pg. 718)
Sales Mix Analysis (pg. 720)
Mid-Chapter Review 4 (pg. 722)
Analysis of Operating Leverage (pg. 722)
Chapter-End Review (pg. 724)
Appendix 15A: Profitability Analysis with Unit and Nonunit Cost Drivers (pg. 724)
Multi-Level Contribution Income Statement (pg. 724)
Variations in Multi-Level Contribution Income Statement (pg. 726)
Appendix 15A Review (pg. 727)
Guidance Answers . . . You Make the Call (pg. 727)
Key Ratios (pg. 728)
Key Terms (pg. 728)
Multiple Choice (pg. 728)
Questions (pg. 730)
Mini Exercises (pg. 730)
Exercises (pg. 732)
Problems (pg. 736)
Cases and Projects (pg. 740)
Solutions to Review Problems (pg. 742)
Chapter 16 Relevant Costs and Benefits for Decision Making (pg. 746)
Identifying Relevant Costs (pg. 748)
Relevance of Future Revenues (pg. 749)
Relevance of Outlay Costs (pg. 749)
Irrelevance of Sunk Costs (pg. 750)
Sunk Costs Can Cause Ethical Dilemmas (pg. 750)
Relevance of Disposal and Salvage Values (pg. 751)
Relevance of Opportunity Costs (pg. 751)
Mid-Chapter Review 1 (pg. 752)
Differential Analysis of Relevant Costs (pg. 752)
Mid-Chapter Review 2 (pg. 753)
Applying Differential Analysis (pg. 753)
Multiple Changes in Profit Plans (pg. 754)
Mid-Chapter Review 3 (pg. 755)
Special Orders (pg. 755)
Mid-Chapter Review 4 (pg. 758)
Outsourcing Decisions (Make or Buy) (pg. 758)
Mid-Chapter Review 5 (pg. 762)
Sell or Process Further (pg. 762)
Mid-Chapter Review 6 (pg. 764)
Use of Limited Resources (pg. 764)
Single Constraint (pg. 764)
Multiple Constraints (pg. 765)
Theory of Constraints (pg. 766)
Limitations of Decision Analysis Models (pg. 767)
Chapter-End Review (pg. 767)
Guidance Answers . . . You Make the Call (pg. 767)
Key Terms (pg. 768)
Multiple Choice (pg. 768)
Questions (pg. 769)
Mini Exercises (pg. 769)
Exercises (pg. 772)
Problems (pg. 776)
Cases and Projects (pg. 780)
Solutions to Review Problems (pg. 783)
Chapter 17 Product Costing: Job and Process Operations (pg. 788)
Inventory Costs in Various Organizations (pg. 790)
Mid-Chapter Review 1 (pg. 791)
Inventory Costs for Financial Reporting (pg. 792)
Product Costs and Period Costs (pg. 792)
Three Components of Product Costs (pg. 792)
A Closer Look at Manufacturing Overhead (pg. 794)
Mid-Chapter Review 2 (pg. 796)
The Production Environment (pg. 796)
Production Files and Records (pg. 797)
Mid-Chapter Review 3 (pg. 798)
Job Costing for Products and Services (pg. 798)
Job Costing Illustrated (pg. 799)
Statement of Cost of Goods Manufactured (pg. 804)
Overapplied and Underapplied Overhead (pg. 805)
Job Costing in Service Organizations (pg. 806)
Mid-Chapter Review 4 (pg. 807)
Process Costing (pg. 808)
Cost of Production Report (pg. 809)
Weighted Average and First-In, First-Out Process Costing (pg. 812)
Process Costing in Service Organizations (pg. 812)
Chapter-End Review (pg. 813)
Appendix 17A: Absorption and Variable Costing (pg. 814)
Basic Concepts (pg. 814)
Inventory Valuations (pg. 814)
Income Under Absorption and Variable Costing (pg. 815)
Production Equals Sales (pg. 815)
Production Exceeds Sales (pg. 815)
Sales Exceed Production (pg. 817)
Evaluating Alternatives to Inventory Valuation (pg. 818)
Appendix 17A Review (pg. 818)
Guidance Answers . . . You Make the Call (pg. 819)
Key Ratios (pg. 819)
Key Terms (pg. 819)
Multiple Choice (pg. 820)
Questions (pg. 821)
Mini Exercises (pg. 822)
Exercises (pg. 823)
Problems (pg. 828)
Cases and Projects (pg. 834)
Solutions to Review Problems (pg. 836)
Chapter 18 Activity-Based Costing, Customer Profitability, and Activity-Based Management (pg. 842)
Activity-Based Costing (ABC) (pg. 844)
Changing Cost Environment (pg. 844)
Mid-Chapter Review 1 (pg. 845)
Activity-Based Costing Concepts (pg. 845)
ABC Product Costing Model (pg. 846)
Mid-Chapter Review 2 (pg. 847)
Traditional Product Costing and ABC Compared (pg. 848)
Applying Overhead with a Plantwide Rate (pg. 848)
Applying Overhead with Department Rates (pg. 848)
Applying Overhead with Activity-Based Costing (pg. 850)
Mid-Chapter Review 3 (pg. 853)
Implementation of ABC (pg. 854)
Limitations of ABC Illustration (pg. 854)
Comparing Traditional and Activity-Based Costing (pg. 854)
ABC Implementation Issues (pg. 855)
Mid-Chapter Review 4 (pg. 856)
ABC and Customer Profitability Analysis (pg. 857)
Customer Profitability Profile (pg. 857)
ABC Customer Profitability Analysis Illustrated (pg. 857)
Mid-Chapter Review 5 (pg. 860)
Activity-Based Management (pg. 860)
The Difference Between ABC and Activity-Based Management (pg. 860)
Chapter-End Review (pg. 861)
Guidance Answers . . . You Make the Call (pg. 861)
Key Terms (pg. 862)
Multiple Choice (pg. 862)
Questions (pg. 863)
Mini Exercises (pg. 863)
Exercises (pg. 867)
Problems (pg. 870)
Cases and Projects (pg. 875)
Solutions to Review Problems (pg. 879)
Chapter 19 Additional Topics in Product Costing (pg. 882)
Production and Service Department Costs (pg. 884)
Mid-Chapter Review 1 (pg. 885)
Service Department Cost Allocation (pg. 885)
Direct Method (pg. 886)
Step Method (pg. 887)
Linear Algebra (Reciprocal) Method (pg. 889)
Dual Rates (pg. 890)
Mid-Chapter Review 2 (pg. 891)
Lean Production and Just-in-Time Inventory Management (pg. 891)
Reducing Incoming Materials Inventory (pg. 892)
Reducing Work-in-Process Inventory (pg. 892)
Reducing Finished Goods Inventory (pg. 894)
Mid-Chapter Review 3 (pg. 894)
Performance Evaluation and Recordkeeping with Lean Production and JIT (pg. 894)
Performance Evaluation (pg. 894)
Simplified Recordkeeping (pg. 896)
Mid-Chapter Review 4 (pg. 897)
Increased Focus on Data-Driven Decision Making (pg. 897)
End-Chapter Review (pg. 898)
Guidance Answers . . . You Make the Call (pg. 898)
KEY RATIOS (pg. 899)
Key Terms (pg. 899)
Multiple Choice (pg. 899)
Questions (pg. 901)
Mini Exercises (pg. 901)
Exercises (pg. 903)
Problems (pg. 905)
Cases and Projects (pg. 909)
Solutions to Review Problems (pg. 910)
Chapter 20 Pricing and Other Product Management Decisions (pg. 914)
Understanding the Value Chain (pg. 916)
Usefulness of a Value Chain Perspective (pg. 918)
Value-Added and Value Chain Perspectives (pg. 920)
Mid-Chapter Review 1 (pg. 920)
The Pricing Decision (pg. 920)
Economic Approaches to Pricing (pg. 920)
Cost-Based Approaches to Pricing (pg. 921)
Mid-Chapter Review 2 (pg. 924)
Target Costing (pg. 925)
Target Costing Is Proactive for Cost Management (pg. 925)
Target Costing Encourages Design for Production (pg. 926)
Target Costing Reduces Time to Introduce Products (pg. 927)
Target Costing Requires Cost Information (pg. 927)
Target Costing Requires Coordination (pg. 927)
Target Costing Is Key for Products with Short Life Cycles (pg. 928)
Target Costing Helps Manage Life-Cycle Costs (pg. 929)
Mid-Chapter Review 3 (pg. 930)
Continuous Improvement Costing (pg. 930)
Mid-Chapter Review 4 (pg. 931)
Benchmarking (pg. 932)
Chapter-End Review (pg. 933)
Guidance Answers . . . You Make the Call (pg. 933)
KEY RATIO (pg. 933)
Key TermS (pg. 933)
Multiple Choice (pg. 934)
Questions (pg. 935)
Mini Exercises (pg. 935)
Exercises (pg. 936)
Problems (pg. 938)
Cases and Projects (pg. 940)
Solutions to Review Problems (pg. 941)
Chapter 21 Operational Budgeting and Profit Planning (pg. 944)
Reasons for Budgeting (pg. 946)
Compel Planning (pg. 946)
Promote Communication and Coordination (pg. 946)
Provide a Guide to Action and Basis of Evaluation (pg. 947)
Aid in Risk Management (pg. 947)
Mid-Chapter Review 1 (pg. 948)
General Approaches to Budgeting (pg. 948)
Output/Input Approach (pg. 948)
Activity-Based Approach (pg. 948)
Incremental Approach (pg. 948)
Minimum Level Approach (pg. 949)
Mid-Chapter Review 2 (pg. 950)
Master Budget (pg. 950)
Sales Budget (pg. 953)
Purchases Budget (pg. 953)
Selling Expense Budget (pg. 954)
General and Administrative Expense Budget (pg. 954)
Cash Budget (pg. 955)
Budgeted Financial Statements (pg. 957)
Finalizing the Budget (pg. 958)
Mid-Chapter Review 3 (pg. 959)
Budget Development in Manufacturing Organizations (pg. 959)
Production Budget (pg. 960)
Manufacturing Cost Budget (pg. 960)
Mid-Chapter Review 4 (pg. 962)
Budget Development and Manager Behavior (pg. 963)
Employee Participation (pg. 963)
Budgeting Periods (pg. 964)
Forecasts (pg. 964)
Ethics (pg. 965)
Open Book Management (pg. 965)
Chapter-End Review (pg. 966)
Guidance Answers . . . You Make the Call (pg. 966)
Key Terms (pg. 967)
Multiple Choice (pg. 967)
Questions (pg. 968)
Mini Exercises (pg. 969)
Exercises (pg. 971)
Problems (pg. 975)
Cases and Projects (pg. 980)
Solutions to Review Problems (pg. 982)
Chapter 22 Standard Costs and Performance Reports (pg. 988)
Responsibility Accounting (pg. 990)
Performance Reporting and Organization Structures (pg. 991)
Types of Responsibility Centers (pg. 991)
Financial and Nonfinancial Performance Measures (pg. 993)
Mid-Chapter Review 1 (pg. 993)
Performance Reporting for Cost Centers (pg. 994)
Development of Flexible Budgets (pg. 994)
Flexible Budgets Emphasize Performance (pg. 995)
Standard Costs and Performance Reports (pg. 995)
Mid-Chapter Review 2 (pg. 996)
Variance Analysis for Costs (pg. 996)
Components of Standard Cost Analysis (pg. 996)
Establishing and Using Standards for Direct Materials (pg. 998)
Mid-Chapter Review 3 (pg. 1000)
Establishing and Using Standards for Direct Labor (pg. 1000)
Mid-Chapter Review 4 (pg. 1002)
Establishing and Using Standards for Variable Overhead (pg. 1002)
Fixed Overhead Variances (pg. 1004)
Mid-Chapter Review 5 (pg. 1005)
Performance Reports for Revenue Centers (pg. 1005)
Inclusion of Controllable Costs (pg. 1007)
Revenue Centers as Profit Centers (pg. 1007)
Chapter-End Review (pg. 1008)
Appendix 22A: Fixed Overhead Variances (pg. 1009)
APPENDIX 22A Review (pg. 1010)
Appendix 22B: Reconciling Budgeted and Actual Income (pg. 1011)
APPENDIX 22B Review (pg. 1012)
Guidance Answers . . . You Make the Call (pg. 1012)
KEY RATIOS (pg. 1012)
Key Terms (pg. 1013)
Multiple Choice (pg. 1013)
Questions (pg. 1014)
Mini Exercises (pg. 1015)
Exercises (pg. 1017)
Problems (pg. 1018)
Cases and Projects (pg. 1024)
Solutions to Review Problems (pg. 1027)
Chapter 23 Segment Reporting, Transfer Pricing, and Balanced Scorecard (pg. 1030)
Strategic Business Segments and Segment Reporting (pg. 1032)
Multi-Level Segment Income Statements (pg. 1034)
Interpreting Segment Reports (pg. 1034)
Mid-Chapter Review 1 (pg. 1036)
Transfer Pricing (pg. 1037)
Management Considerations (pg. 1037)
Determining Transfer Prices (pg. 1039)
Mid-Chapter Review 2 (pg. 1042)
Investment Center Evaluation Measures (pg. 1042)
Return on Investment (pg. 1042)
Investment Center Income (pg. 1045)
Investment Center Asset Base (pg. 1045)
Other Valuation Issues (pg. 1046)
Residual Income (pg. 1046)
Economic Value Added (pg. 1046)
Which Measure Is Best? (pg. 1047)
Mid-Chapter Review 3 (pg. 1049)
Balanced Scorecard (pg. 1049)
Balanced Scorecard Framework (pg. 1050)
Balanced Scorecard and Strategy (pg. 1052)
End-Chapter Review (pg. 1053)
Guidance Answers . . . You Make the Call (pg. 1054)
Key Ratios (pg. 1054)
Key Terms (pg. 1054)
Multiple Choice (pg. 1054)
Questions (pg. 1056)
Mini Exercises (pg. 1056)
Exercises (pg. 1059)
Problems (pg. 1062)
Cases and Projects (pg. 1067)
Solutions to Review Problems (pg. 1069)
Chapter 24 Capital Budgeting Decisions (pg. 1072)
Long-Range Planning and Capital Budgeting (pg. 1075)
Mid-Chapter Review 1 (pg. 1078)
Capital Budgeting Models That Consider Time Value of Money (pg. 1078)
Expected Cash Flows (pg. 1078)
Manager Behavior and Expected Cash Flows (pg. 1079)
Net Present Value (pg. 1079)
Internal Rate of Return (pg. 1081)
Cost of Capital (pg. 1082)
Mid-Chapter Review 2 (pg. 1082)
Capital Budgeting Models That Do Not Consider Time Value of Money (pg. 1083)
Payback Period (pg. 1084)
Accounting Rate of Return (pg. 1084)
Mid-Chapter Review 3 (pg. 1085)
Evaluation of Capital Budgeting Models (pg. 1085)
Mid-Chapter Review 4 (pg. 1087)
Additional Aspects of Capital Budgeting (pg. 1088)
Using Multiple Investment Criteria (pg. 1088)
Evaluating Risk (pg. 1088)
Differential Analysis of Project Cash Flows (pg. 1089)
Predicting Differential Costs and Revenues for High-Tech Investments (pg. 1090)
Mid-Chapter Review 5 (pg. 1092)
Taxes in Capital Budgeting Decisions (pg. 1092)
Depreciation Tax Shield (pg. 1092)
Investment Tax Credit (pg. 1094)
Chapter-END Review (pg. 1095)
Appendix 24A: Time Value of Money (pg. 1095)
Future Value (pg. 1095)
Present Value (pg. 1096)
Annuities (pg. 1097)
Unequal Cash Flows (pg. 1099)
Deferred Returns (pg. 1099)
Appendix 24A Review (pg. 1100)
Appendix 24B: Table Approach to Determining Internal Rate of Return (pg. 1100)
Equal Cash Inflows (pg. 1100)
Unequal Cash Inflows (pg. 1101)
Appendix 24B Review (pg. 1102)
Guidance Answers . . . You Make the Call (pg. 1102)
Key Ratios (pg. 1102)
Key Terms (pg. 1103)
Multiple Choice (pg. 1103)
Questions (pg. 1104)
Mini Exercises (pg. 1105)
Exercises (pg. 1106)
Problems (pg. 1108)
Cases and Projects (pg. 1111)
Solutions to Review Problems (pg. 1115)
Appendix A Compound Interest and the TimeValue of Money (pg. A-1)
Future Value Concepts (pg. A-2)
Present Value Concepts (pg. A-3)
Present Value of a Single Amount (pg. A-3)
Present Value of an Annuity (pg. A-4)
Installment Loans (pg. A-5)
Bond Valuation (pg. A-5)
Calculating Bond Yields (pg. A-6)
Future Value of Annuities (pg. A-6)
Using Excel to Compute Time Value (pg. A-7)
Future Value Calculations (pg. A-7)
Present Value Calculations (pg. A-10)
Key Terms (pg. A-17)
Exercises (pg. A-17)
Appendix B: Data Analytics and Blockchain Technology (pg. B-1)
Data Analytics (pg. B-2)
Data Analytics in the Accounting Profession (pg. B-2)
Blockchain Technology (pg. B-3)
Summary (pg. B-5)
Key Terms (pg. B-5)
Multiple Choice (pg. B-5)
Exercises (pg. B-6)
Index (pg. I-1)
Michelle L. Hanlon

Michelle L. Hanlon

Michelle L. Hanlon is the Howard W. Johnson Professor at the MIT Sloan School of Management. She earned her doctorate at the University of Washington.

Prior to joining MIT, she was a faculty member at the University of Michigan. Professor Hanlon has taught financial accounting to undergraduates, MBA students, executive MBA students, and Masters of Finance students. Professor Hanlon also teaches Taxes and Business Strategy to MBA students. She is the winner of the 2013 Jamieson Prize for Excellence in Teaching at MIT Sloan.

Professor Hanlon’s research focuses primarily on the intersection of taxation and financial accounting. Her recent work examines the capital market effects of the accounting for income tax, the reputational effects of corporate tax avoidance, and the economic consequences of U.S. international tax policies for multinational corporations. She has published research studies in the Journal of Accounting and Economics, the Journal of Accounting Research, The Accounting Review, the Review of Accounting Studies, the Journal of Finance, the Journal of Financial Economics, the Journal of Public Economics, and others. She has won several awards for her research and has presented her work at numerous universities and conferences. Professor Hanlon has served on several editorial boards and currently serves as an editor at the Journal of Accounting and Economics. 

Professor Hanlon has testified in front of the U.S. Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means about the interaction of financial accounting and tax policy. She served as a U.S. delegate to the American-Swiss Young Leaders Conference in 2010 and worked as an Academic Fellow at the U.S. House Ways and Means Committee in 2015.

Robert P. Magee

Robert P. Magee

Robert P. Magee is Keith I. DeLashmutt Professor of Accounting Information and Management at the Kellogg School of Management at Northwestern University.

He received his A.B., M.S. and Ph.D. from Cornell University. Prior to joining the Kellogg faculty in 1976, he was a faculty member at the University of Chicago's Graduate School of Business. For academic year 1980-81, he was a visiting faculty member at IMEDE (now IMD) in Lausanne, Switzerland.

Professor Magee's research focuses on the use of accounting information to facilitate decision-making and control within organizations. He has published articles in The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics, and a variety of other journals. He is the author of Advanced Managerial Accounting and co-author (with Thomas R. Dyckman and David H. Downes) of Efficient Capital Markets and Accounting: A Critical Analysis. The latter book received the Notable Contribution to the Accounting Literature Award from the AICPA in 1978. Professor Magee has served on the editorial boards of The Accounting Review, the Journal of Accounting Research, the Journal of Accounting and Economics and the Journal of Accounting, Auditing and Finance. From 1994-96, he served as Editor of The Accounting Review, the quarterly research journal of the American Accounting Association. He received the American Accounting Association's Outstanding Accounting Educator Award in 1999 and the Illinois CPA Society Outstanding Educator Award in 2000.

Professor Magee teaches financial accounting to MBA and Executive MBA students. He has received several teaching awards at the Kellogg School, including the Alumni Choice Outstanding Professor Award in 2003.

Glenn M. Pfeiffer

Glenn M. Pfeiffer

Glenn M. Pfeiffer is Professor of Accounting at the George L. Argyros School of Business and Economics at Chapman University.

He received his M.S. and Ph.D. from Cornell University after he earned a bachelor's degree from Hope College. Prior to joining the faculty at the Argyros School, he held appointments at the University of Washington, Cornell University, the University of Chicago, the University of Arizona, and San Diego State University.

Professor Pfeiffer’s research focuses on financial reporting and capital markets. He has investigated issues relating to lease accounting, LIFO inventory liquidation, earnings per share, employee stock options, corporate reorganization, and technology investments. He has published articles in The Accounting Review, the Financial Analysts Journal, the International Journal of Accounting Information Systems, the Journal of Applied Business Research, the Journal of High Technology Management Research, the Journal of Accounting Education, and several other academic journals. In addition, he has published numerous case studies in financial accounting and reporting.

Professor Pfeiffer teaches financial accounting and financial analysis to undergraduate, MBA, and Executive students. He has also taught managerial accounting for MBAs. He has won several teaching awards at both the undergraduate and graduate levels.

Thomas R. Dyckman

Thomas R. Dyckman

Thomas R. Dyckman is Ann Whitney Olin Professor Emeritus of Accounting and Quantitative Analysis at Cornell University’s Johnson Graduate School of Management.

In addition to teaching accounting and quantitative analysis, he has taught in Cornell’s Executive Development Program. He earned his doctorate degree from the University of Michigan. He is a former member of the Financial Accounting Standards Board Advisory Committee and the Financial Accounting Foundation, which oversees the FASB. He was president of the American Accounting Association in 1982 and received the association’s Outstanding Educator Award for the year 1987. He also received the AICPA’s Notable Contributions to Accounting Literature Award in 1966 and 1977.

Professor Dyckman has extensive industrial experience that includes work with the U.S. Navy and IBM. He has conducted seminars for Cornell Executive Development Program and Managing the Next Generation of Technology, as well as for Ocean Spray, Goodyear, Morgan Guaranty, GTE, Southern New England Telephone, and Goulds Pumps.

Professor Dyckman has coauthored eleven books and written over 50 journal articles on topics from financial markets to the application of quantitative and behavioral theory to administrative decision making. He has been a member of the editorial boards of The Accounting Review, The Journal of Finance and Quantitative Analysis, The Journal of Accounting and Economics, The Journal of Management Accounting Research, and The Journal of Accounting Education.

Last Updated: May 31 2023

Corrections to identified errors in the text.

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